Health Affairs February 16, 2024
The Inflation Reduction Act (IRA) empowers Medicare to negotiate drug prices, a major change long sought to control spending and vigorously opposed by drug manufacturers. The law represents a compromise. It initially only allows negotiations for 10 single-source drugs. Negotiations over prices only begin midway through the drug’s patent life. At that point, the Centers for Medicare and Medicaid Services (CMS) will be allowed to negotiate the lowest possible maximum fair price (MFP), as long as that price is no higher than what Medicare currently pays and is a specified discount from the average private market price. The discount rate increases the longer the drug has been marketed.
To develop its initial offer, CMS will start with Medicare’s price for...
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